Jul 21, 2021 - Economy

Netflix tries new tricks amid subscriber slowdown

Data: FactSet, company filings; Chart: Sara Wise/Axios

Netflix on Tuesday officially opened up about its new gaming efforts, telling shareholders it plans to include games in members’ Netflix subscription plans at no additional cost in the near future.

Why it matters: The announcement came after Netflix reported its weakest quarter for subscriber additions in many years. Netflix actually lost subscribers in North America for the second time in company history.

Details: In a letter to shareholders, the tech giant confirmed reporting from Axios Gaming editor Stephen Totilo that the company is looking to first focus on mobile games.

  • It later said during an investor video interview that "ultimately, we see all of the devices that we currently serve as candidates for some kind of game experience."
  • Netflix says it wants to experiment both with standalone games and games tied to its specific franchises. The company says it will also explore licensing games from third-parties.
  • In a letter to shareholders, the company said it viewed gaming as "another new content category," similar to Netflix's foray into areas such as original films, animation and unscripted TV.
  • Netflix said last week it hired its first-ever VP of game development.

Be smart: Netflix says its streaming competitors like Disney+ and HBO Max aren't an existential threat to its growth, but it's clear that new entrants are having an impact on the company's ability to grow as quickly as it used to.

  • Axios has previously reported, citing Kantar data, that the percentage of new streaming subscribers to Netflix in the U.S. has declined since the onset of the pandemic thanks to increased competition from new streamers.
  • "[T]here’s plenty of room to grow without taking it away from the other streamers," Netflix co-CEO Reed Hastings said in the investor interview.
  • Instead, the streaming giant continued to name gaming and mobile video companies, like YouTube, TikTok and Fortnite parent Epic Games as its biggest competitors for users' time.

The big picture: Netflix's efforts in gaming are just part of a few new business lines that the company is eyeing after years of dominating video streaming.

  • Last month the company debuted Netflix.shop, an online merchandise store that features products inspired by shows on its streaming platform. It's also investing more in podcasts as a way to promote its movies and series, per the Los Angeles Times.
  • In the investor video call Tuesday, Hastings said these efforts are meant to be "enhancing the big service that we have ... to support the title brands to get our conversations up around each of the titles, so that the Netflix service becomes must have."

What's next: Netflix says next quarter won't look much better. After initially saying it expects subscriber additions to pick up in the back half of the year, the company cautioned investors that it anticipates adding just 3.5 million subscribers.

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